Rosenka Land Value Survey

Land prices in Japan up for 3rd straight year: 2018 Roadside Land Value Survey of Japan

July 3, 2018

The National Tax Agency recently published the 2018 Roadside Land Values survey (路線価 or rosenka). The main takeaway is that the national average price for land increased for the third straight year, driven by demand from inbound tourists and re-development projects in major city centers.

Another important takeaway from the report is that the year-on-year average increase of 0.7 percent represents a higher rate of growth for the second year in a row, but the gap between major cities and rural areas continued to widen. Last year, nationally land prices increased 0.4% on average.

Growth was widespread across Japan’s major cities. Land prices climbed in 18 of the country’s 47 prefectures, compared with 13 last year. In 29 prefectures, land prices fell, with Akita marking the largest decline at 2.3 percent.

Top Three by Prefecture

By prefecture, Okinawa saw the highest increase at 5.0% due to strong demand for hotels, especially in Naha, the prefectural capital. Tokyo came second with a 4.0% rise driven by demand related to preparations for the 2020 Olympic games. Third was Miyagi at 3.7%, with demand driven by development projects in the prefectural capital of Sendai, whose coastal areas suffered catastrophic damage from the tsunami caused by the 2011 Tohoku earthquake.

Land prices went up in Osaka prefecture by 1.4% year-on-year and Aichi prefecture by 1.5%, both increasing at a higher rate than in the 2017 survey. Other prefectures of note: Hokkaido (up 1.1%), Miyagi (up 3.7%), Hiroshima (up 1.5%), Fukuoka (up 2.6%).

Ginza 5-Chome Plot

A plot (Ginza 5-chome in Chuo Ward) in Tokyo’s Ginza shopping district in front of the Kyukyodo stationary store was valued at 44.32 million yen ($400,000) per square meter, making it the most expensive piece of land in Japan for the 33rd consecutive year. The rate of growth (9.9% year-on-year) was also the highest ever recorded.

Niseko, Hokkaido Plot

A plot (Niseko Kogen Hirafusen street) in the ski resort town of Niseko, Hokkaido had the highest rate of growth in land value (88.2%). As Niseko has gained worldwide popularity as a ski destination, demand for high-end vacation homes has continued to rise.

Foreign Tourists and City-Center Development Driving Demand

Two main factors are seen to be driving the rise in land prices.

Japan attracted a record 28.69 million tourists in 2017, up 19.3% from the previous year and the sixth consecutive yearly increase. All these tourists are pushing up demand for accommodation and shopping complexes, as developers compete for scarce land in coveted locations. Furthermore, the government has set an annual target of 40 million inbound tourists by 2020, a target likely to be met, meaning that inbound demand will probably continue to grow.

The second driving factor is demand for city-center condominiums. Condominiums located near major transportation hubs in central Tokyo (and other big cities such as Osaka and Nagoya) are in tight supply, at the same time that sales are strong for high-end units (price at 100 million yen ($900,o0o0) and above).

Will land prices continue to rise?

Some analysts expect average land prices in Tokyo, which have risen for five years in a row, to peak before the Olympics. In a recent NLI Research Institute survey, 45% of 113 industry experts said metropolitan land prices “have already peaked” or “will peak this year”, while 32% predicted they will “by 2019″ and 13%”by 2020.” Other observers have also pointed out that it is difficult to predict the potential effect of oversupply that might be caused by building facilities for the Olympic village.

However, there is another camp who see the Olympic effect as being limited. They point to the fact that there are large-scale urban re-development projects planned for major Tokyo hubs (Shibuya, Toranomon, and Shinagay, for example) that will continue to grow even after the Olympics; and that the rise in land prices in many prefectures outside Tokyo is not directly related to the 2020 games.

In the second camp, some observers also point out that the Bank of Japan will likely continue its policy of quantitative easing for some time, making it relatively easy to obtain financing for investment in land and properties.

Significance of the Rosenka Survey

The rosenka survey is used for calculating inheritance and gift tax when ownership in land is transferred, and as land values increase, so do inheritance taxes.

The rosenka looks at parcels of land categorized by adjacent major road. In 2018, over 330,000 parcels were surveyed. This is over ten times the number of parcels assessed for the other major public valuations, the Official Land Values (公示地価 or kouji chika) estimated as of January 1st and released by the Ministry of Land, Infrastructure, Transport, and Tourism (the “MLIT”) in March every year, and the Standard Land Values (基準地価 or kijun chika) estimated as of July 1st by each prefecture and published in September every year.